Sensex crashes 900 pts, Nifty below 23,300: Adani Group stocks' fall and two other factors behind market fall

Equity benchmark indices Sensex and Nifty tumbled in early trade on Thursday amid sharp fall in Adani group stocks and unabated foreign fund outflows.

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Benchmark indices Sensex and Nifty declined 1 percent in November 21 trade, weighed down by a sharp sell-off in Adani group stocks, rising geopolitical tensions and persistent foreign institutional investor (FII) outflows.

The BSE Sensex opened at 77,711.11 in Thursday's trade and dropped over 900 points to its intraday low of 76,802.73. At around 12.35 pm, it rebounded marginally to trade at 77,127.42.  The NSE Nifty declined 179.75 points to 23,338.75 in the morning trade.

Market analysts are also gauging sentiments ahead of the state assembly election results. "Considering the current state of market nervousness owing to the recent global geo-political developments and the fresh Adani bribery saga, we believe that any unfavorable outcome for the ruling Maharashtra state government would add further pressure on markets," noted Manish Chowdhury, Head of Research, StoxBox.

Meanwhile, among the sectoral indices Nifty PSU Bank emerged as the biggest laggard, tumbling 3.58 percent, followed by Nifty Metal and Nifty Media. Heavyweight counters such as State Bank of India (SBI), Adani Enterprises, and Adani Ports contributed over 70 points to Nifty's losses. Here’s a closer look at the three key factors that drove the markets lower:

1) Adani Indictment: Adani Group stocks faced huge selling pressure, plunging up to 20 percent after Gautam Adani and seven others were indicted in a New York federal court on charges of bribery and fraud. The indictment accuses Adani of orchestrating a $250-million bribery scheme to secure favourable terms for solar power contracts in India.

Shares of State Bank of India (SBI), the country’s largest public sector lender, slumped 5.16 percent, hitting an intraday low of Rs 761.55 on the NSE. The PSU lender has exposure to Adani Group companies.

2) Rising Geopolitical Tensions: Escalating tensions in the Russia-Ukraine conflict also spooked global and domestic markets. Ukraine’s use of UK-supplied Storm Shadow missiles and Russia's recent changes to its nuclear doctrine have heightened investor uncertainty.

"The escalation of tensions in the Ukraine-Russia war can weigh on markets. The element of uncertainty caused by the escalations is high, and therefore most market participants are likely to adopt a wait-and-watch approach," said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

3) Foreign Investor Outflows: FII and domestic institutional investor (DII) data on November 18 indicated a slowdown in selling by FIIs, coupled with consistent buying by DIIs. However, the relief was short-lived as FII selling spiked again on November 19, reaching Rs 3,411.73 crore, further denting market sentiment.

Weak trends in the Asia also drove the markets lower in India as Nvidia’s revenue numbers, released after the market close in US, fell short of expectations. In Asian markets, Tokyo, Shanghai and Hong Kong traded lower while Seoul quoted higher.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.